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Politically-Speaking Is The FCPA Doomed In The Next Five To Seven Years?

Today’s post is from is Rajat Soni who recently started a new website FCPA World Monitor [1].  If you do not currently read FCPA World Monitor you should consider adding it to your list.  Soni has a nice style and an informed perspective on the issues.

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Politically-Speaking is the FCPA Doomed in the Next Five to Seven Years?

One of the best aspects of studying and writing about the FCPA is the large amount of thoughtful scholarship examining the various twists and turns in the statute.  Given its open-ended use of terms like “foreign official”, “instrumentality” and “obtain or retain business” the FCPA has always been fertile ground for statutory stargazers and those seeking law review article topics.  Indeed, a ready source of information comes from the wide body of legal scholarship providing up to the minute assessments of cases and investigations with an eye toward predicting (or perhaps astrologically guessing) the future course of litigation.

A funny feature of the academic scholarship (and law firm newsletters) is that almost every article begins with a recitation of the history of the statute.  I suppose its great for the newly initiated and it can also be interesting when pondering specific issues.  But for regular commentators and practitioners, the introduction to the statute almost feels as well-known and predictable as the preamble of the Constitution.  To wit:  (i) the statute was born out of a corollary to the Watergate scandal, (ii) Congress was appalled that hundreds of companies were paying millions of dollars of bribes and doing so via off-the-books slush funds, (iii) Congress was concerned in particular about Lockheed Martin which was receiving corporate welfare assistance at the same time it was paying foreign bribes.

I’ve read various iterations of the phrase “Watergate inspired statute” lines in literally dozens of articles.  But then I stopped for a moment and thought about the historic and literally unprecedented times out of which the FCPA was born.   Watergate is so cliched and barren of meaning today that its hard to remember it was a real event.  Well maybe “full-blown constitutional crisis” is a better term.  It has no equal in historical precedent in the last forty years (sorry, Whitewater land deals don’t cut it.)   So I was playing a bit of a thought game as I perused the various political blogs lately.  Can you imagine the current Congress passing the FCPA? I laughed when I thought about it.  They can’t pass a budget, a debt ceiling extension or even routine funding bills.   There is absolutely, positively no way today’s Congress would ever pass the FCPA, given the strength of the business lobby (such as the Chamber of Commerce and ALEC, although the latter is focused on state legislatures), the current economic malaise, and the general inability to move any legislation.

Following Citizens United, the very targets of the FCPA, large multi-national corporations, can now donate unlimited funds.  Who do you think Charles and David Koch think should decide whether a bribe is paid: the free market or prosecutors?  I have a guess.  Before we get too far along, your politics can be whatever you want them to be.  I am not here to argue pro or against one party or the other. I am simply asking, is the statute really that safe looking at politics as it is today.   There are many people on both sides of the aisle who are troubled by the FCPA regime as it is today.  And Democrats can be as corporation-friendly as Republicans.

Today’s Republicans, which are more in line with Barry Goldwater, really love corporations and really hate perceived government overreach (particularly if it is aimed corporations). I  have a hard time seeing today’s politicians rejecting the common business position at the time the FCPA was being debated that businesses paying bribes were already victims because they are coerced into going along with the schemes.  I also think Republicans are more open to blaming the corrupt foreign countries and their toxic political and business environments, rather than the corporations themselves.  For example, who do you think Republicans would like to punish more for FCPA violations in China:  errant US companies or the Chinese?  Right now, the FCPA punishes the companies quite severely.

So when will the FCPA erode?  If you play political guessing games, you can still come up with the same 5 to 7 year timeline.  Let’s assume President Obama wins reelection (whether or not you support him).  In that case, Congress will most likely continue to tip to the GOP (even the Senate could fall in 2014).  Republicans will be motivated to continue holding Congress to keep a check on a Democratic White House.  This means Congressional committees will be run by the GOP. With GOP committees friendly to business interests, I would be utterly unsurprised to see FCPA reform become a key business issue. Indeed, if the reform is framed as eliminating the punishment of US companies abroad while also curtailing “business uncertainty” it will fit within a broader GOP narrative, especially as our inevitably anemic recovery continues to putter along.

If President Romney takes office in January 2013, and Congress holds in its current configuration, two things will happen.  First, President Romney will just shut down the vigorous FCPA enforcement regime in the DOJ and SEC.  Since so much of the FCPA’s teeth is simply the government’s enforcement posture, FCPA enforcement may simply die by neglect.  Marching orders will change drastically as President Romney certainly won’t tolerate the DOJ hauling CEOs to the dock.  Second, if the GOP holds the House, tips the Senate and gets the White House, the statute could be amended and have additional defenses added, narrowed definitions, and perhaps even smaller penalties. One final point, if Romney loses, then a GOP-led White House is almost assured for 2016. The race will be wide-open but the nation will be ready to flip the Oval Office to the party out of power, and Republicans will be highly motivated to take back the executive branch.  In which case, the same curtailment discussed here will occur in 2017 instead of 2013.

In conclusion, right now it is common and accepted wisdom to say that FCPA enforcement is vigorous and getting even more so.  But that’s part of the sales pitch for FCPA, Inc.  I’m not saying that there isn’t truth or hard numbers to back the claims.  Rather, law firms, forensic firms, discovery consultants and accountants do themselves no particular good to downplay the FCPA.  But remember that Watergate was a political earthquake in America. The GOP was literally at its weakest and most humbled point in the last seventy years.  It is in this environment that the statute took flight.   In that sense, the FCPA probably could not have been born at any other time, and certainly not today (like it’s transatlantic cousin the UK Bribery Act.)

Again, it doesn’t really matter if you are a Republican or Democrat or Independent.  More likely than not, in the near future, the FCPA is going to become one more political football tossed about between the parties.  That means its robust future is not as certain as it might seem today.